The nation’s largest banks turned in strong performances as first quarter earnings period opened Friday. But for some reason, investors gave them a thumbs down.
Wells Fargo (NYSE: WFC), J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C) and PNC Financial Services Group (NYSE: PNC) grew profits by 28 percent compared to the same period of 2017, while the S&P 500 was expected to experience a 17 percent jump.
Yet stock prices all declined from Thursday close to Friday close for JPMorgan (2.7 percent), Wells Fargo (3.4 percent), Citigroup (1.6 percent), PNC (-4.6 percent). This came despite the fact that analysts had expected banks to benefit from the corporate tax rate being reduced from 35 percent to 21 percent.
Analyst Dick Bove, who tracks many of the nation’s largest banks, offered an explanation to CNBC about the chasm between the performance of four of the 10 biggest U.S. banks and how Wall Street responded.
“If you take out the capital markets business and the one-time events, it shows these banks aren’t doing any business, and that’s the key problem,” Bove said. “If you take a look right across the board, credit cards are down, auto is down, student loans are down, the corporate area is mixed to down. The only thing that’s working is middle-market lending.”
It will be interesting to see if the trend continues when Bank of America Corp. (NYSE: BAC), the lone member of the Big 4 banks yet to report, delivers its first quarter results Monday.
Worth noting for San Francisco-based Wells, Philadelphia’s largest bank by deposits, are its results are subject to change upon further compliance discussions with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency. An April 9 Reuters report said the bank will be subject to a record fine as high as $1 billion for auto insurance and mortgage lending abuses.
As for Pittsburgh-based PNC, Philadelphia’s third largest bank, CEO Bill Demchak told analysts that he expects to roll out the bank’s national retail digital bank later this year. That, he said, will enable the bank to take advantage of brand awareness, expanding on its middle-market franchise. Demchak first revealed the new retail strategy in December.
It involves Virtual Wallet, PNC’s mobile banking platform available across the country right now, and the regional business banking expansion — launched in 2017 in Denver, Houston, Texas and Nashville, Tenn., with Dallas, Minneapolis and Kansas City, Mo., added in 2018 — to build commercial lending. The new step will be adding a handful of brick-and-mortar branches because 60 percent of the clients PNC surveyed want it to have a physical presence.
Here is what else is happening in the financial services sector.
M&T to pay $2.5M to settle overtime complaint
M&T Bank Corp. has agreed to pay nearly $2.5 million to settle a Fair Labor Standards Act class action complaint alleging failure on the bank’s part to pay overtime wages to certain IT workers whose workweeks exceeded 40 hours, Buffalo Business First reported.
According to court documents, the complaint alleges that Buffalo-based M&T (NYSE: MTB), which has major operations in the Philadelphia area, violated state and federal labor laws by misclassifiying certain IT employees in New York state as exempt from overtime pay and failing to provide proper annual wage notices or accurate wage statements.
The class action involves 240 plaintiffs, a mix of current and former M&T workers. Though it agreed to settle, M&T has denied all liability and all substantive allegations.
Bank of America launches digital mortgage application
Bank of America unveiled its Digital Mortgage Experience last week, which allows customers to apply for a mortgage on the bank’s mobile app or online and potentially receive conditional approval within a day.
The Charlotte Business Journal said the platform will allow BofA customers to communicate with lending specialists, personalize their loan terms, lock in interest rates, and save an application in process and return to it later. Users will also have access to Home Loan Navigator, a platform designed to track loans, monitor user actions, upload documents and review and acknowledge disclosures from a smart phone.
Development began in 2017 and it will be available to all of its customers as of Monday.
BofA is one of the first banks to start a full-digital mortgage application platform for mobile and online use. In mid-2017, Wells Fargo CEO Tim Sloan told the Charlotte Business Journal the bank was piloting its own digital mortgage application among employees and hoped to roll it out by the end of this year.
This is BofA’s second major announcement on the digital side of its operations this year. Last month, the bank unveiled its latest artificial intelligence tool: virtual financial assistant Erica. It can help app users access balance information, transfer money between accounts, send money with Zelle and navigate the app in general.
Sharon Bank hires new chief lender
Darby-based Sharon Bank hired Beneficial Bank executive William J. Mattern to serve as its chief lending officer.
Mattern most recently served as senior vice president and team leader of commercial real estate at Beneficial (NASDAQ: BNCL), where he was responsible for new business development in Delaware and the five county area surrounding Philadelphia. He also served as a commercial lender for Alliance Bank, WSFS Bank and Sovereign Bank and started his career as a credit analyst for CoreStates Bank.
Mattern was hired a year after Joseph Corrato joined the bank as CEO after holding the same position at Prudential Bancorp. It also comes a month after receiving regulatory approval to convert from a savings bank holding company to a bank holding company. Corrato said those changes were made to reflect the bank’s increased efforts in commercial lending.
Sharon Bank, founded in 1873, has five branches in Delaware and Philadelphia counties.
ICYMI
Last week, JPMorgan, the nation’s largest bank, earned regulatory approval to open its first retail branches in the Philadelphia region; BB&T Corp. eliminated 50 jobs by closing an Allentown call center; and despite some positive signs, residential foreclosures are still plaguing the region.
| Rank | Prior Rank | Name / Prior (*new or not ranked) / |
|---|---|---|
1 | 1 | Delaware Valley Regional Planning Commission |
2 | 2 | University City District |
3 | 3 | University City Science Center |
